cap

An upper limit for a variable, such as the upper limit on the interest rate paid or received in a transaction. For example, an adjustable-rate mortgage may have a cap of 10 percent. In this case, the rate can adjust however the loan terms provide, without exceeding 10 percent.

Also called a ceiling.

Cap is often used with its converse, a floor. A cap may be an embedded option, such as the cap on the rate for a floating rate loan, or a stand-alone option contract. American Banker Glossary

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An upper limit on the interest rate on a floating-rate note ( FRN) or an adjustable-rate mortgage ( ARM). Also, an OTC derivatives contract consisting of a series of European interest rate call options; used to protect an issuer of floating-rate debt from interest rate increases. Each individual call option within the cap is called a caplet. Opposite of a floor. Bloomberg Financial Dictionary

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This is a CREST Member's credit limit with his payment bank. The payment bank guarantees to meet client obligations up to this maximum. Dresdner Kleinwort Wasserstein financial glossary

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Cap limit or credit line in CREST. Euroclear Clearing and Settlement glossary

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An agreement with a counterparty that sets an upper limit to interest rates for the cap buyer for a stated time period. Exchange Handbook Glossary

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An option strategy that sets a ceiling on the holder's interest rate exposure. LIFFE

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CAP CAP

ECONOMICS abbreviation for Common Agricultural Policy

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   The Common Agricultural Policy. This European Union policy was designed to stabilize commodity markets within Europe and ensure regular supplies at reasonable prices while guaranteeing farmers' income. It is implemented through a complex mix of price support mechanisms and export restrictions.

   ► See also EU, Green Rates.

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Ⅰ.

cap UK US /kæp/ noun [C] FINANCE

► [C] an upper limit on the amount of money that can be spent or charged in connection with a particular activity: »

a price/salary/spending cap

a cap on sth »

They called for the government to keep the cap on public-sector spending.

impose/remove a cap »

The letter of intent defined the work to be carried out and imposed a cap on cost.

► [C or U] ABBREVIATION for CAPITALIZATION(Cf. ↑capitalization) : »

We are investing in companies with an average market cap of $400 million.

→ See also LARGE-CAP(Cf. ↑large-cap) adjective, MID-CAP(Cf. ↑mid-cap) adjective, SMALL-CAP(Cf. ↑small-cap) adjective

Ⅱ.

cap UK US /kæp/ verb [T, often passive] (-pp-)

► to put an upper limit on the amount of money that can be spent or charged in connection with a particular activity: »

Annual expenses on each fund will be capped at 1.25%.

→ See also CAP AND TRADE(Cf. ↑cap and trade)